Here’s how much money climate action could save us

If the United States doesn’t mitigate greenhouse gas emissions, air pollution will worsen, labor hours will decrease, and crop prices will be higher, a new report from the EPA warns.

The comprehensive survey estimates the potential economic damage from global warming, tallying up billions of dollars that could be saved through aggressive climate policies.

By surveying six sectors — health, infrastructure, electricity, water resources, agriculture and forestry, and ecosystems — the EPA report found that global warming’s associated extreme temperatures and increased incidence of natural disasters could lead to a variety of unforeseen consequences. In the health sector, the EPA estimated that more than 69,000 lives could be at risk by 2100 due to worsening air quality and extreme temperatures. Plus, more than 1.2 billion labor hours could be lost in the same period due to extreme temperatures.

The report also forecasted that mitigation efforts taken now could prevent the loss of more than a third of the U.S. oyster and scallop supplies and more than a quarter of the clam supply by 2100. The damage to resulting from water shortages could range as high as $180 billion.

The EPA report comes at a time when House Republicans are preparing to vote this week to weaken or kill the Obama administration’s limits on power plant emissions, The Hill reports.

Shell’s former chairman made a startling comment about climate change

When the oilmen themselves are arguing for stronger action to fight climate change, it’s probably time to start acting.

Sir Mark Moody-Stuart, the former chairman of oil giant Royal Dutch Shell, said that the lack of progress the world has made on climate change is, “distressing,” and that it was “rational” for investors to start divesting their money from companies that extract fossil fuels, according to a report in The Guardian.

According to the paper, “His striking remarks are the most supportive of divestment made by any senior figure in the fossil fuel business.”

Moody-Stuart is a geologist who worked his way up through the firm to become its chairman, though he retired from that role in 2005. Says Stuart: “If you think your money can be used somewhere else, you should switch it. Selective divestment or portfolio-switching is actually what investors should be doing.”

Coffee snobs: This brew may get pricey, thanks to climate change

We have known for some time that coffee is a climate-sensitive crop. Now we have the first global evidence that increasing minimum, or night-time, temperatures are having the hardest impact on your daily brew.

A warmer world with soaring day time temperatures has been linked to the decline of many plant and animal species. Unless climate change can be mitigated, or farmers can find ways to adapt, the future for many crops including coffee looks bleak.

Coffea arabica and Coffea robusta are the most popular forms of coffee in the world. Due to the quality, arabica achieves a much higher price premium.

Coffea arabica, which accounts for most of the world’s production, is grown throughout the highland tropics of Africa, typically between 1000 and 2300 metres above sea level. Most is grown in Tanzania, Kenya and Ethiopia.

In the past, heat and drought stress were typically noted as the major constraints that affected coffee production. Now it appears that steadily increasing night-time temperatures are actually having the greatest impact.

The crop is comfortable in a marginal temperature bracket ranging between 18 to 21°C. Outside of this temperature bracket the plant’s metabolic processes begin to change. This subsequently has a negative impact on yield and quality.

Every 1°C rise in minimum temperature will result in annual yield losses of approximately 137 kg per hectare. This is roughly 60% of the average smallholder farmer’s current production in Tanzania, on which our study is based. Tanzania was used as a reference because it has many valuable climate and yield datasets which are often not recorded or are subsequently lost. It is also similar to many other African nations in terms of its coffee production.

Coffee is Tanzania’s most important export crop, generating average export earnings in the order of $100 million per annum. Grown predominantly by smallholder farmers, coffee is usually inter-cropped with other subsistence crops like beans, maize and bananas.

Yields are currently 50% lower than they were in 1960. If we project this into the future, without substantial adaptation strategies, coffee production could drop to critical levels in Tanzania.

Naturally, the decline in yields is not solely due to minimum temperature increases. All aspects of climate change variables play a role but rising minimum temperatures certainly have the greatest influence.

Land availability, lack of resources, overpopulation and the sensitivity of arabica make coffee growing in the tropics a fickle business. As temperatures increase, producers within the growing band of 1000 to 1300 metres above sea level in many areas of the globe are struggling to manage sufficient quality and yields. Even farmers at 1500 metres above sea level, such as those on Mt. Kilimanjaro are becoming marginal.

Moving higher upslope in pursuit of cooler temperatures is rarely feasible. Despite the fact that most highland areas are already overpopulated and that most of these regions are encroaching on protected forests, it’s not feasible for farmers to just pick up and move on.

While most governments have invested heavily in the coffee industry, few have implemented adaptation strategies to help farmers cope with changing conditions.

The industry is aware of the impact of climate change on coffee production, but they need hard data to prove to regional decision makers how urgently climate adaptation strategies need to be put in place.

Shade-grown coffee is a common agro-forestry practice with benefits for ecosystems and biodiversity, as shade trees provide a habitat for native birds, insects and wildlife.

But the right type of shade for coffee needs to be chosen. Strategic shading is needed, such as selecting trees that provide a high enough canopy to help reduce the daytime maximum temperatures while allowing the night-time terrestrial radiation to escape back through the atmosphere.

Other adaptation strategies such as breeding coffee that is less susceptible to climate change is an ongoing process. But this could take several decades. More extreme measures such as switching to a hardier species of coffee, such as the lower quality Robusta, or moving in altitude or latitude do not pose attractive options either.

It’s not just the Tanzanian highlands at risk. Attention should also be drawn to the arabica growing regions of Brazil, Colombia, Costa Rica, Ethiopia and Kenya. Evidence shows these areas have followed strikingly similar minimum temperature trends.

The coffee in each region exists within its own unique niche. In order to be effective, site-specific adaptation strategies need to be implemented. Hopefully these hard numbers encourage the public and private-sectors to invest in climate change adaptation strategies that will better sustain this important industry and the livelihoods of millions of smallholder farmers who depend on it.

Top hedge fund manager: Global warming isn’t a danger

One of Wall Street’s most successful hedge fund managers is once again wading into the climate change debate. His conclusion: It’s not as big of a problem as some suggest.

Cliff Asness, who runs AQR, one of the largest hedge fund firms in the world, e-mailed out a research paper on Tuesday to reporters and others making his arguments on climate change. The paper is labeled “very preliminary,” and Asness asked that it not be directly quoted.

The paper focuses on a chart of the Earth’s surface temperatures going back to 1880. Asness, who wrote the paper along with his co-worker Aaron Brown, does not deny that global temperatures are rising. But he says temperatures are rising at much slower rate than many suggest. What’s more, Asness and Brown say, based on the current pace of global warming, it will take another 500 years before the changes become a real problem.

Asness writes that he is not trying to deny the science of climate change, but that he is just looking at the data and what it says on its own. He offers other observations about climate change, including that the decline in Arctic sea ice or rising sea levels could just be the result of a mild increase in temperatures and not a sign that the world is about to get dramatically warmer.

Asness is bound to win some fans with his argument. Florida, for instance, reportedly banned workers in its Department of Environmental Protection from using the terms “climate change,” “global warming,” and “sustainability.”

But many scientists say there is little question that the Earth is warming and that it is a serious problem. “I’m not sure about the idea of beating people about the head and shoulders, but within less than a year, you will look like complete fools (if you buy this crap),” e-mailed Columbia University environmental science professor James Hansen, who took a look at the Asness and Brown paper at Fortune’s request.

Asness’ AQR manages about $122 billion. He regularly publishes research papers, but they tend to be about investing, not politics. But he has been an outspoken critic of President Obama in the past, and he is an active Republican donor. Then again, Asness’ views have not always followed GOP party lines. In 2011, Asness, along with other hedge fund managers, backed a push to legalize gay marriage. In early 2013, he wrote a piece for the conservative think-tank American Enterprise Institute criticizing his fellow Republicans for not taking up the issue of civil rights more forcefully.

This is not the first time Asness has waded into the global warming debate. Last year, he was criticized for an offhand remark he made about climate change in an article directed at economist Paul Krugman on the Fed and inflation. (A little more than four years ago, Asness and others predicted the Fed’s monetary stimulus would lead to inflation. It hasn’t.) In the piece, Asness wrote, “I’m amazed that a Paul Krugman can look at 15+ years of the earth not warming and feel his beliefs need no modification or explanation, but 4 years of the CPI not inflating is reason not simply to declare victory, but to decry those who disagree with him as ‘Knaves and Fools.'”

Krugman ally and UCLA economist Brad Delong wrote a blog post about Asness’ climate comments with the following headline: “Department of WTF!?”

In an e-mail response to Fortune, Asness declined to comment on why he decided to take on climate change again now. “In all honesty I’m just a curious guy and think this was an important point,” he wrote. Since publishing the paper, he said he’s been attacked mostly by people whose views are more conservative than his, mostly for agreeing that temperatures are warming, if ever so slightly, and that humans are responsible.

Asness declined to say if his beliefs on global warming have affected the way he invests. Some advocates have suggested that large funds should factor in the likely outcome of global warming when choosing their investments.

In the paper, Asness and Brown say that, at least so far, temperatures have risen much more slowly than scientists have predicted, and that we are still far away from the point at which rising temperatures would cause a problem. Asness admits that temperatures may rise more quickly in the future, but he argues that the data doesn’t show it. Asness asserts that if the next 135 years deliver similar temperature changes from what we saw in the past 135 years, we should be fine.

Gavin Schmidt, who is the director of the NASA Goddard Institute for Space Studies, says the paper that Asness and Brown put out is “not science, it’s just wishful thinking.” Schmidt says looking at temperatures in a vacuum, as Asness and Brown are doing, is misleading. Schmidt says that the predictions that temperatures will rise much faster in the future are based on measurements of the emissions of CO2 gases, which are known to heat the planet and are accelerating. He says that’s a much better method of predicting future temperatures, rather than just taking a chart of past temperatures and drawing a future trend line, as Asness and Brown have done.

“It’s not a happy thought, but this kind of folksey chartism is not going to cut it,” says Schmidt.

Yes, Florida is allowed to ban the term “climate change” from its workers’ mouths

Florida—a state often typecast as a land of oddities and outlandish narratives—spawned its latest believe-it-or-not story on Sunday when the Florida Center for Investigative Reporting published a report that employees at the state Department of Environmental Protection had been told to not use the terms “climate change,” “global warming,” and “sustainability.”

DEP officials have been ordered not to use the term “climate change” or “global warming” in any official communications, emails, or reports, according to former DEP employees, consultants, volunteers and records obtained by the Florida Center for Investigative Reporting.

The policy goes beyond semantics and has affected reports, educational efforts and public policy in a department that has about 3,200 employees and $1.4 billion budget.

The prohibition, which went into effect in 2011, is especially noteworthy since Florida is considered the U.S. state most vulnerable to the effects of a warming world. But at the same time, the policy is not entirely surprising. Florida Governor Rick Scott, who was elected to a second term in November, has said on many occasions that he is not convinced that climate change is due to human actions, despite scientific evidence that says otherwise.

The FCIR reports that four former employees with the department confirmed the ban, saying that it had been verbally communicated statewide. One of them said that staffers were warned that using the terms would garner “unwanted attention to their projects.”

Spokeswomen for the department and the governor’s office told the FCIR that the ban didn’t exist.

It may seem harsh and invasive for an employer to exert such control of their workers’ speech, but it’s also very likely legal. And, in fact, Florida’s alleged move is rather similar to a rule that Boston’s mayor recently instituted that kept city employees from bashing the city’s bid for the 2024 Olympics.

Determining a public employer’s right to limit workers’ free speech is a matter of balancing three factors: whether the speech is related to a worker’s job responsibilities, whether it’s a matter of public concern, and whether there’s justification for the government to treat employees differently from any other member of the public, says Curtis Summers, a labor and employment lawyer from the Husch Blackwell firm. If a Florida Department of Environmental Protection employee challenged the reported ban in court, there’s a good chance the judgement would go in the government’s favor, Summer says.

The same outcome is likely for private employers, says Bruce Barry, a management professor at Vanderbilt University and author of Speechless: the Erosion of Free Expression in the American Workplace. “In private employment, your rights aren’t zero, but they’re very limited.”

Rick Scott’s administration, Summers says, is “implementing the agency the way they want to implement it. It’s akin to … when a new party wins office, members of the other vacate their positions, he says, “You have to have people who effectuate the agenda,” he says. Even if that agenda is—arguably—based on junk science, or no science at all.

This is all a reminder, Summers says, that in their professional capacity, “public employees are one class of citizens who don’t get full benefit of the First Amendment.”

Why targeting U.S. college portfolios won’t stop climate change

In 2011, 350.org founder Bill McKibben and other environmental activists launched a divestment campaign that, over time, has expanded across university campuses and become part of the backdrop in the climate change conversation. The campaign often points to the “Carbon Underground” list of top 200 public fossil fuel companies based on the potential climate impact of their reserves.

I first heard about the list from a few Princeton University students who asked me for an opinion during a speaking engagement at the Princeton Club of New York. While my mind raced for a publicly acceptable answer, all I could think about was whether NRG Energy, the electric company I am CEO of, was on the boycott list.

Much to my relief, NRG was not; the list consisted of companies that produce fossil fuels (or at least own the reserves in the ground). This surprised me, given that while NRG is the second largest power generation company in the United States, it’s also one of the largest emitters of carbon. NRG, like virtually all electricity producers, principally converts thermal energy embedded in fossil fuels into electric energy — a process that directly causes the vast majority of greenhouse gas emissions.

This led me to ask a broader question: why is the divestment campaign targeting oil, gas and coal companies only – and not electric companies or other industries, or businesses or even individuals who consume fossil fuels?

Part of the reason is because the valuations of fossil fuel stocks are based on fossil reserves and there is no real alternative to monetizing reserves other than to sell them for consumption. In contrast, electricity producers can (as we and others are beginning to demonstrate) diversify our asset base away from fossil fuels and still thrive. But perhaps the most compelling reason NOT to target consumers of fossil fuels is that it would mean targeting virtually everybody, including – presumably – the organizers of the divestment campaign themselves.

This logical flaw is one of several reasons why I don’t support the fossil fuel divestment campaign. With Global Divestment Day kicking off on Friday, it’s important to look closely at the divestment efforts. Simply, it’s just not feasible to envision fossil fuel usage ending any time soon, an unavoidable fact that blurs the desired outcome for the campaign and dilutes its potential material impact.

There’s also the issue of scale, since the justification for and against divestment both have their proponents. As of February, 16 colleges have divested from fossil fuels, most of which have small endowments. The most notable is Stanford University, which agreed to divert its $18.7 billion endowment away from direct investment in coal companies. Even if the sum seems impressive, it pales in comparison to the vast sums of investment capital ready, willing and able to invest in energy companies, regardless of whether they emit carbon. Unless divestment participation ramps up dramatically, the campaign won’t have much of a direct impact on the valuation or the business behaviors of the energy companies directly targeted.

Regardless of whether the campaign succeeds, what worries me as the CEO of a fossil fuel consuming energy company is that the vortex of the divestment campaign is university campuses. Today’s students are of the millennial generation – at 80 million strong, the largest generation in American history and the largest segment of the U.S. population – a generation that wants there to be a purpose and a social conscience embedded in every consumer decision they make. The last members of that generation will enter college around 2022 and leave campus in 2026. That means we have 12 more years of millennials in college and, for my part, I would hate to see those students exposed to campaigns about the evils of fossil fuel-consuming energy companies. After all, these students are NRG’s future customers.

In business, where there is risk, there is opportunity. And while the divestment effort may or may not succeed in bringing about a symbolically punitive action against fossil fuel companies, it cannot help but succeed in creating a negative perception against those companies in the minds of students. This may foreclose the chance we have right now to take the awareness it raises and turn it into an opportunity to connect with this generation and galvanize them, as consumers, into the type of action – and answers – to which American business will be highly responsive.

Climate change is, to be sure, an intergenerational issue but it belongs to the millennials more than any other. They will suffer the brunt of the consequences and, unfortunately it appears that if we don’t get going now, they will have to implement the solutions.

I focus on implementation because most of the solutions exist today. A suite of large-scale and distributed clean energy technologies have reached the maturity, and the price point, that makes sense for large-scale commercial deployment. What is lacking is the market catalyst for that comprehensive deployment.

I’m betting on the millennials to be that catalyst.

David Crane is CEO of NRG Energy.

Correction: An earlier version of this article misstated that 350.org publishes the Carbon Underground list. The list is created and published by Fossil Free Indexes. The article has been updated.

The coast of Louisiana is sinking. Here’s a billion-dollar plan to save it.

With the 10th anniversary of Hurricane Katrina on the horizon next summer, the federal and local governments, which got everything desperately wrong—to the tune of 1,833 lives and $108 billion lost—now have a chance to get something right. If they do, Louisiana could become a leading exporter of science and engineering
skills desperately needed by coastal communities from the Jersey Shore to the Mekong Delta. If they don’t, millions of Gulf residents, the bulk of the nation’s offshore oil and gas production, most of our seafood production, and a shipping corridor ferrying half of all U.S. imports will be at risk of drowning in storm surges.

It’s a multibillion-dollar bet—and it’s being placed thanks to the troubles of an international oil company. Here’s the audacious plan: Restore disappearing Gulf wetlands, a strategy that’s not just about protecting fish and birds but also about rebuilding natural storm barriers. Unless engineers can stop southern Louisiana from sinking into the Gulf—the Mississippi Delta is the fastest-disappearing land on the planet—even post-Katrina’s modernized levees will be overwhelmed. In this grim future “it won’t take a Katrina to cause Katrina-size damage,” warns Nick Speyrer, planning director for the nonprofit Water Institute of the Gulf.

When I visited the Water Institute’s Baton Rouge offices overlooking the Mississippi River, I couldn’t find a drop of the charged politics that drives so many environmental conversations in Washington. The founding partners are Republican Gov. Bobby Jindal and Democratic Sen. Mary Landrieu. CEO Chip Groat is a scientist who ran the U.S. Geological Survey for Presidents Bill Clinton and George W. Bush.

And get this: The Jindal aide who helped launch the Water Institute was a Republican congressional candidate in 2014 who managed to attract campaign financing from the oil-friendly Koch brothers—and the liberal Environmental Defense Fund.

While oil companies have contributed to the disappearance of wetlands, the Water Institute doesn’t point fingers at an industry that is the region’s economic lifeline. Instead, Groat and Speyrer say they want industry to step up to the community table with participation and funding—rather than rely on Band-Aid solutions to protect their own facilities from rising waters.

Indeed, the main culprit behind the disappearance of the delta wetlands dates back eight decades—to the killer Great Mississippi Flood of 1927, after which the federal government built the world’s longest system of levees and floodways. But those same protections also prevented sediment from pouring into the Mississippi and feeding the Gulf’s wetlands.

As a result, 1,900 square miles of land have disappeared since the 1930s, and the Water Institute predicts that another 1,750 square miles will be lost in the next 50 years—potentially producing $23.4 billion in annual damages as water drowns factories and refineries, communities, and roads. “We cannot rebuild the coast of 1930 or 1950, or even 1995,” says Speyrer. “But we can stop the bleeding and hold on to what we have.”

DISAPPEARING BAYOU A combination of badly designed levees, oil company development, and hurricans

A major element of the state’s master plan is to cut holes in levees and install massive gates that can be opened in the spring to feed river sediment to adjacent wetlands. It’s complex—and expensive. This multibillion-dollar project will get off the ground thanks to federal fines levied on BP after the 2010 Deepwater Horizon oil spill. That’s an irony not lost on Speyrer: “Yes,” he says, “the BP oil spill provided the opportunity to do these things.”

The dollar amounts and the plans are still in play, and Water Institute officials say far more resources will be needed even after that money comes through.

But if the Water Institute can persuade government, industry, and philanthropy to take up the cause, the Gulf Coast could become a pioneer innovator on controlling encroaching seawaters around the globe. “Sea levels are rising,” says Speyrer. “We are the canary in the coal mine. It’s a field of innovation that’s exportable.” From southern Louisiana, no less.

Why climate change policy won’t hinge on international talks

World leaders gathered at a United Nations summit this week to kick off 15 months of negotiations aimed at finalizing a climate pact next December in Paris. If you focus on those international climate talks, though, you’ll miss most of the real action. The fate of global efforts to tackle climate change – and of the businesses that will win and lose as a result – depends far more on what countries do at home.

Climate change has long been approached as the ultimate foreign policy problem. Greenhouse gas emissions anywhere raise temperatures everywhere. What that means for climate policy is that emissions cuts anywhere curb global warming everywhere. Since cutting emissions usually costs money, it makes sense for each country to ask other countries to act while trying to do as little as possible themselves: that way, they keep their costs to a minimum, but still benefit from reduced climate change because of what others have done. The danger is that if every country adopts this attitude, no one will do much of anything. The only way out of this beggar-thy-neighbor quagmire, strategists have long assumed, is for countries to reach a legally binding pact in which they all curb greenhouse gas emissions at the same time.

That’s why people have long paid attention to the international climate talks. It’s also why, after the last big talks at Copenhagen in 2009 failed to produce a legally binding climate treaty, so many people assumed that climate action was dead.

Yet something perplexing happened in the nearly five years since. Leaders from the United States to China moved forward with domestic climate policies despite the absence of a solid international foundation. The Environmental Protection Agency (EPA), for example, announced regulations aimed at coal-fired power plants earlier this year despite no international agreement requiring that it do so.

Three things explain what’s going on.

Countries are taking actions that cut carbon emissions for all sorts of reasons that have nothing to do with climate change. China, for example, is facing massive challenges as a result of its dependence on coal. Suffocating pollution is wrecking public health, hurting productivity, and boosting the risk of social unrest. Chinese leaders have responded with a plan that includes a gradual shift toward natural gas and renewable energy and away from coal. A happy byproduct of this set of policies is reduced greenhouse gas emissions. But China isn’t waiting for an international deal to take these steps, because it has other reasons to pursue them. And if businesses and investors focus on diplomatic negotiations to divine where China is heading on climate policy, they’ll be inevitably surprised.

Policymakers around the world are also discovering that it’s possible to loosely coordinate their climate efforts with each other even absent an international deal. Conventional wisdom about climate diplomacy owes a lot to experience with nuclear arms. During the Cold War, if the United States wanted to cut its nuclear arsenal, it needed iron-clad assurances that the Soviet Union was cutting its arsenal too. That meant not only tough legal requirements but also extensive and mandatory monitoring and verification to ensure that the secretive Soviet military wasn’t cheating. Many have long assumed that something similar was needed for climate change in order to ensure that every country was doing its part. But the United States doesn’t need a treaty or a complex inspections system to know roughly what Chinese emissions are and what policies China has adopted to reduce them – it can rely largely on a mix of market data, news reports, and intelligence. (China has an even easier time tracking the United States.) Each country can adjust its national policy as it sees shifts elsewhere in the world – even without a treaty.

The last reason that climate policy will be determined mainly at the national level is that that’s where the most important political forces lie. Take the United States as an example. The biggest sources of opposition to strong U.S. climate action are skepticism that it is a serious problem and concern by some industries (notably coal and oil producers as well as energy-intensive manufacturers) that they’ll lose out as a result of robust climate policy. Whether or not there’s an international deal doesn’t matter much to them – they have independent reasons to oppose aggressive action. This means that watching domestic politics, rather than international diplomacy, will give far more insight into where policy is heading.

None of this is to say that international climate diplomacy doesn’t matter. The overall tone of the international climate talks can bleed over into domestic policy and politics. International commitments can also help lock in policy at home: the United States, for example, decided unilaterally in 2009 to cut its emissions by 17% from 2005 levels by 2020, but became more committed to that goal after pledging it publicly in Copenhagen. That political commitment has had wide-ranging consequences for emissions and for business as the Obama administration has rolled out a series of regulations and other policies designed to meet its target. And targeted international deals can help speed the flow of funds to climate friendly projects in poor countries and accelerate the diffusion of low-carbon technology.

But that doesn’t change the bottom line: Spend too much time watching the international climate talks and you’ll miss the real climate action. Focus on what’s happening in national and state capitals if you want to know what’s really going on.

Why clean energy is ripe for U.S. growth

As tensions in the Middle East mount precipitously, and show every likelihood of continuing for years or even decades, the U.S. needs to step up its efforts to achieve energy independence. Historically, the U.S. has been able to rely on Arab nations to meet about 30% of its oil needs, but the explosive political landscape in the Middle East could restrict or even shut down that supply at any time.

While the erstwhile popular theory of ‘peak oil’, which postulates that domestic supplies of U.S. oil reached their peak in 2005 and will falter in the future has been widely discredited, it still contains some truth. Even if oil production is not declining, energy consumption is rising rapidly, which is the other side of the coin. At the same time, environmental regulations that restrict the ability of oil companies to drill in protected areas like the Arctic Natural Wildlife Refuge puts pressure on new drilling, and can still lead to an energy shortfall.

On the back of this situation, natural gas has risen in importance. It provides a seemingly endless supply of energy for everything from heating to electricity. Currently, natural gas accounts for 27% of electricity generation stateside, driven by low natural gas prices, and is projected to rise to 30% by 2040. Despite political controversy over ‘fracking,’ a technique used to extract shale gas from the ground, there is little reason to believe that the U.S. can practically afford to impose limits in this arena given the immense value of this resource for our energy infrastructure. In addition, the U.S. currently has 2.2 trillion cubic feet of natural gas, which is enough to last for 92 years, according to the U.S. Energy Information Administration.

However, these statistics are based on demand remaining static at today’s levels. They fail to factor in the possibility of an oil supply deficit in the future, either due to government regulations that restrict new drilling or perhaps a shock in the Middle East, which would automatically lead to the faster consumption of natural gas and cause a supply/demand imbalance in that sector as well.

This means that other sources of energy will be required to supplement natural gas for the U.S. to achieve energy independence.

One possibility is biofuels such as ethanol and biodiesel, which are obtained from plant tissues and are renewable. However, these fuels generate much less energy than crude oil and are difficult to refine. Researchers are working on methods to counter these factors but are still very early in that process. Biofuels are also, contrary to popular notion, not carbon neutral. The other options are traditional sources such as coal and nuclear, which will continue to provide a steady percentage of our energy needs. However, the environmental concerns surrounding these fuels, as with biofuels, could hamper production and provide an impetus for the generation of clean energy, driven by solar, hydroelectric, wind, geothermal, and hydrogen fuel cell technologies.

This is supported by a new report by the United Nations Intergovernmental Panel on Climate Change, which echoes alarms about global warming and highlights the need for the U.S. to seriously examine its progress on energy.

Today, clean energy accounts for only 8% of electricity generation and 11% of total energy production in the U.S. The reason for this is the high expense of producing clean energy relative to the output, and consequently pricing. In addition, investment in low carbon technologies fails to yield sufficient savings to make it cost effective for the power sector and industrial consumers, leading to a slower migration to energy efficient technologies. Making this scenario even more complicated are the mixed signals from policymakers over the years on carbon pricing, which underpins the economics in this arena.

This can all change, however, at the 21st United Nations Framework Convention on Climate Change Conference, set to take place in Paris in 2015. The UNFCCC is expected to set a global protocol for the reduction of CO2 emissions, to be enacted in 2020. The clarity from such a protocol is expected to set the market for carbon at a level sufficiently high to justify investments in environmentally friendly technologies, which would then give both producers and consumers of clean energy better visibility on their investments.

The clean energy sector in the U.S. still has a long way to go. Unlike Europe and China, where the adoption of such technologies is progressing rapidly, American producers have yet to reach the critical mass required to bring down prices, and consumers still lack a real incentive – other than a desire to reduce greenhouse gas emissions – or even options to switch to such sources of energy. This will gradually change as the industry matures but will require U.S. policymakers to push for energy independence.

The turmoil in the Middle East should motivate us to act. In a high-tech world, all commercial activity depends on a stable, sufficient and affordable source of energy. That energy has historically come primarily from oil, but just as natural gas has emerged as a crucial fuel in this environment, it’s time for clean energy to catch up as well. It’s no longer just an environmental imperative but an economic one.

Sanjay Sanghoee is a political and business commentator. He has worked at investment banks Lazard Freres and Dresdner Kleinwort Wasserstein, as well as at hedge fund Ramius. Sanghoee sits on the Board of Davidson Media Group, a mid-market radio station operator. He has an MBA from Columbia Business School and is also the author of two thriller novels. Follow him @sanghoee.

He leads the country that could drown

On the evening of June 5, two U.S. secret service agents patrolled the main lobby of American Museum of Natural History in New York. They were guarding Anote Tong, the president of Kiribati, a nation of 32 atolls that stands in the middle of the Pacific some 3,000 miles from New Zealand. A short man with a salt and pepper hair and gray mustache, President Tong was busy exchanging handshakes with the guests—two Taiwanese diplomats, representatives of various non-profit groups and couple of scientists who’ve studied the underwater life around his islands. It was an annual gala of Conservation International (CI), an environment protection group, and President Tong spoke passionately about how Kiribati was drowning due to rising sea levels and its people had no higher ground to move to. “The ocean is at the front, back, sideways, everywhere,” Tong said. “We are trapped.”

Tong, a board member of CI, is an ardent speaker on climate change. His efforts to sensitize the world about rising sea levels are driven by where his country stands today—on the equatorial line, barely six and a half feet above sea level. In frequent intervals, the violent tides run over Kiribati’s farmland. Apart from vanishing landmass, President Tong has to deal with drinking water shortages, bad crops, and crumbling infrastructure.

Wherever he goes—which includes a conference on oceans hosted by the State Department this week—President Tong speaks like a lone witness of some unknown disaster, stressing what scientists have predicted: that by the end of this century Kiribati will disappear from the face of the earth.

After becoming president in 2003, Tong reached out to dozens of world leaders and asked them to build a strong discourse on climate change in the UN. At the 2004 UN General Assembly, when global terrorism was on top of the agenda, Tong introduced a new phrase, “climate terrorism.” Today he laughs at making such a move. “I did that out of desperation,” he says. “No one was listening to me so I thought, ‘let me cook up something catchy.’” Sometimes the fear of drowning has led him to consider ideas as strange as creating a $2 billion “floating island,” a spaceship-like structure with a capacity to hold 30,000 people. Since that idea didn’t materialize, he bought 6,000 acres of land in Fiji where he says his people will migrate in case of the feared climatic disaster.

Since January, a committee that includes the former Prime Minister of Australia, Malcolm Fraser as well as former archbishops from New Zealand and Papua New Guinea has been campaigning for President Tong to be awarded the Nobel Peace Prize.

More recently, Tong received attention for closing a significant portion of ocean—an area the size of California some 1,000 kilometers away from Kiribati—to commercial fishing. The ban, which will be implemented starting January 1, 2015, has big ramifications for the countries that have fishing licenses issued by Kiribati—the US, Japan, Taiwan and South Korea as well as the global fishing market, since the Phoenix Island Protected Area, which will be closed, lies within the region that is home to the largest remaining stocks of tuna where 60% of the world’s tuna catch occurs, according to CI. As New York Times columnist Thomas Friedman asked Tong on stage at the gala: “how does little state like Kiribati get away telling Japan, Korea, no more fishing?”

To get the answers to that and more, Fortune sat down with President Tong for an in-depth interview in which he talked about his childhood, his fast changing homeland, and the rationale behind the fishing ban.

Fortune: Many news reports suggest that you’re considering relocating the entire population of Kiribati to Fiji. How do you feel about that?

President Tong: It is quite painful when you think that you are actually planning to depopulate the nation. We have told people that they can choose whether they want to relocate or not. They will do it out of choice. I advocate relocation but relocation with dignity. Our people wont be refugees, they will be people migrating with dignity. And the world has to make a commitment that the people of Kiribati must not disappear.

When did climate change start hurting Kiribati?

When I was in the secondary school there was a village I used to walk through and it began to disappear slowly. We tried to erect a protective sea wall but it didn’t work. The village is no longer there. What remains of the village is a church building sitting out in the middle of the sea.

How did you react to it?

When I was young, I was in the sea every day. We didn’t have a lot to eat, so we would go to sea, catch fish, cook it and eat it. We loved it. You learn to live with the sea. It is part of you, you take everything, you accept everything. If there is rough weather, you expect it. But I think it was in the later years, in mid-2000s, even before I became [the president], there were some expressions of concern about the rising sea level. The climate change had been flouted around the international scene.

What’s been the response of other world leaders?

If you check my speech from the 2004 United Nations General Assembly, you will sense that there was a lot of anger and frustration [on the part of the other leaders], a sense of futility that nobody was listening to me, that nobody cared.

Has anything changed since then?

Yes, things have changed radically. I met John Kerry last year in Bali and he spoke very strongly and powerfully about climate change. Things weren’t like that before. In 2009, I was in a closed dinner with President Obama here in New York. There were about 26 leaders. There was a frank exchange of what to do about climate change. All these people were talking about carbon emissions and its impact on their economies. I felt very frustrated. I couldn’t resist but speak about my stand. I was like—look you’re talking about your economies but it’s about our survival here.

Did President Obama say anything?

He didn’t react, but I think he understood. He later told us that it was very difficult to do anything because the U.S. hasn’t fully accepted the notion of the climate change and it’s going to take time to swing the position of the U.S.

We have got another 3 million square kilometers of water that will be open to fishing. We are closing only 11 percent of 3.5 million square kilometers. And we are preserving that much as our asset for future. This would allow the fish stock to recover.

We had started thinking about it long time back but we needed to continue to work with our official partners and all those who have an interest in fishing. We could not just say that we’re closing because we had signed fishing access agreements and we had to be careful that we don’t breach those agreements.

Is this your first response to climate change?

It is part of trying to get the message across. Over the years I have been talking at the United Nations, [but] nobody seemed to listen to this. They were all preoccupied by international terrorism. I would like to send a very clear message to the international community that we do need to make a sacrifice. To indicate our commitment because for us it is not an easy story, what we are facing is not easy, so we went to do this to demonstrate that we are serious, that other countries can and must make similar sacrifices.

To what extent is your economy dependent on tuna fishing?

We get around $400-$500 million in revenue every year. And this is the landed value, out of which the state gets a 10 percent cut, so we make $40 million annually.

How will you fill your budget deficit?

We balance our budget with trust funds. We have our own national trust fund. We invest money offshore. We invest in Japan, Europe, everywhere. The HSBC bank manages our investments. When we need money, we look into these stocks and fill the trust. We do lose money once in a while. In 2008 stock market crash, we lost about $18 million in Icelandic banks.

What if illegal fishermen intrude into your banned territories and defeat the purpose of your ban?

We have a ship rider agreement with the U.S. whereby the U.S. Coast Guard provides surveillance within our waters. They are authorized to detain the illegal fishermen.

Why are you planning future development when your islands are going underwater?

This thought does come but we have got to go on. We don’t put everything away because what is projected will happen. In the back of our minds there is that denial—that we won’t drown—and we could never get rid of that. Hopefully, somehow, some divine hand will intervene and do something about it.